2018 Vault Rankings

Pepsico, Inc. at a Glance

Uppers

Downers

Corporate politics

Long hours exist in many positions

The Bottom Line

PepsiCo is a well-known global brand with a reputation for being a great place to work.

About Pepsico, Inc.

PepsiCo butts heads with its eternal rival The Coca-Cola Company
for the title of world's biggest soft drinks maker. PepsiCo's soft
drink brands include Pepsi, Mountain Dew, Tropicana, Gatorade, and
Aquafina water. The company also owns Frito-Lay, the world's #1
snack maker with offerings such as Lay's, Ruffles, Doritos, and
Cheetos. The Quaker Foods unit makes breakfast cereals (Quaker
oatmeal, Life), Rice-A-Roni, and Near East side dishes. Pepsi
products are available in 200-plus countries. The company operates
its own bottling plants and distribution facilities.

Operations

PepsiCo's pervasive presence is founded on a broad portfolio of
mega brands each of which generates more than $1 billion in annual
sales. Business is supported by nearly 700 manufacturing facilities
worldwide.

Operations are organized into six business units: Frito-Lay
North America (FLNA); Quaker Foods North America (QFNA); North
America Beverages (NAB); Latin America; Europe Sub-Saharan Africa
(ESSA); and Asia, Middle East and North Africa (AMENA).

FLNA, about 25% of revenue, lays about a big spread of branded
snack foods. Its brands include Lay's, Doritos, Cheetos, Tostitos,
Fritos, Ruffles, and Santitas, which it sells to independent
distributors and retailers. In a joint venture with Strauss Group,
it makes and sells Sabra dips and spreads.

The QFNA segment accounts for around 5% of sales and consists of
the manufacture and distribution of cereals, rice, pasta, and other
branded products. Products include Quaker-branded oatmeal, grits,
rice cakes, granola, oatmeal squares, as well as Quaker Chewy
granola bars. It also makes and sells Aunt Jemima mixes and syrups,
Life cereal, and Rice-A-Roni side dishes.

The ESSA segment brings in more than 15% of sales and consists
of the manufacture and sale of its soft drink and snack brands in
Europe and Sub-Saharan Africa. Additional activities include the
marketing and distribution of dairy products including Chudo,
Agusha, and Domik v Derevne.

Latin America and AMENA both account for around 10% of sales and
make, market, and distribute PepsiCo's snack foods and beverages in
the region. Region-specific brands include Toddy, Manzanita Sol,
H2oh! (Latin America) and Kurkure, Chipsys, and Crunchy
(AMENA).

Geographic Reach

The US accounts for around 55% of PepsiCo sales. Important
international markets for the company include Russia, Mexico,
Canada, and the UK. PepsiCo is also active in emerging and
developing markets, particularly Brazil, China, India, Africa, and
the Middle East.

Sales and Marketing

To promote its products, PepsiCo uses a combination of sales
incentives, discounts, advertising, and other marketing
activities.

PepsiCo's customers include wholesale distributors, grocery and
convenience stores, mass merchandisers, membership stores,
authorized independent bottlers, and food service distributors,
including hotels and restaurants. The company's snacks, beverages,
and other products are brought to market through
direct-store-delivery (DSD), customer warehouse, and distributor
networks. Walmart is its largest customer, accounting for 15% of
its overall sales and about 20% of PepsiCo's North American
business.

PepsiCo's top five retail customers account for more than 30% of
the company's net revenue in North America.

Financial Performance

PepsiCo's revenue has been as flat as a day-old soda for the
past three years after peaking at about $66.7 billion in 2014.

In 2017, the company reported sales of $63.5 billion compared to
sales of $62.8 billion in 2016. North American Beverage revenue
declined 2% on lower volume while Frito-Lay North America revenue
rose 2% from price increases, despite a 1% drop in volume
(including a low single-digit decline in Doritos sales). The
company posted growth of 5% and 8% in Latin America and Europe and
Sub-Sahara Africa, respectively, but sales declined 5% in Asia, the
Middle East, and Africa.

Pepsico's profit dropped to $4.8 billion in 2017 from $6.3
billion in 2016. Expenses in 2017 included a $2.5 billion provision
for federal income tax from the US Tax Cuts and Jobs Act. Income
before taxes was $9.6 billion in 2017 compared to $8.5 billion in
2016. Higher commodity costs also weighed on the bottom line in
2017.

Cash from operations fell $10 billion in 2017 from $10.7 billion
in 2016 due, in part, to higher payments to vendors and customers
in 2017.

Strategy

Key to PepsiCo's growth strategy is to drive sales for its
retail customers by introducing new products and enhancing existing
products through more focus on global research and development.

The company has moved aggressively to provide healthier drink
and snacks in response to rising consumer health-consciousness in
recent years. It has introduced two new product concepts: Everyday
Nutrition products, which contain nutrients like grains, fruits,
vegetables, and proteins; and Guilt-Free products, which covers all
Everyday Nutrition products in addition to products with less than
70 calories from sugar per 12 ounces and with low sodium and
saturated fats.

Recent additions to the lineup include LIFEWTR, a premium
bottled water, LEMON LEMON, a low-sugar sparkling lemonade. About
half of the company's revenue comes from healthier drinks and
snacks, up from less than 40% a decade ago.

The health initiatives were driven by Indra Nooyi, the company's
CEO who was due to step down in 2018. The company's revenue rose to
more than $63 billion from $35 billion in her 12-year tenure. She
was to be succeeded by Ramon Laguarta, a 22-year PepsiCo
veteran.

To improve its profitability over the long term, the company
also continues to focus on improving productivity by lowering
overhead costs, utilizing its global scale, getting rid of
duplication, and implementing cost-saving technologies. Beginning
in 2014, PepsiCo has managed to cut costs by $1 billion in four
consecutive years with an immaterial impact on the top line. This
was achieved by increased automation and restructuring global
manufacturing and distribution. It plans to continue the program
until 2019.

Mergers and Acquisitions

In 2018 PepsiCo agreed to acquire SodaStream, an Israeli firm
that makes an at-home drink carbonation machine. The deal is worth
around $3.2 billion and extends PepsiCo's reach directly into
customers' homes.